NPS Swasthya: How the new healthcare savings model works

Summary

NPS Swasthya combines a healthcare investment account with a mandatory super top-up health insurance policy.

A medical emergency can derail financial planning, particularly during retirement, when income may be limited, and healthcare costs can rise sharply. Keeping that in mind, the Pension Fund Regulatory and Development Authority (PFRDA) launched NPS Swasthya on 1 October, NPS Diwas.

It combines a healthcare investment account with a mandatory super top-up health insurance policy.

The proposition is different from simply buying a health insurance policy. Under NPS Swasthya, the subscriber builds a corpus that can be used to meet healthcare expenses, including the deductible under the super top-up policy. This means the subscriber does not have to arrange the deductible entirely from other savings when a claim arises.

Subscribers can also transfer funds from their existing National Pension System (NPS) account under the All Citizen Model to the Swasthya account.

To enrol, an individual must first open an NPS Swasthya Investment Account. The subscriber has to deposit ₹1,000 towards investment, pay an annual Health Benefit Administrator (HBA) maintenance charge of ₹200 and the first-year health insurance premium. The PFRDA has appointed Medi Assist as the first HBA.

Thereafter, the minimum contribution is ₹10 per annum. The renewal premium can also be funded from the NPS Swasthya corpus, subject to the subscriber’s mandate.

How the insurance component works

Any individual eligible to join NPS can enrol in NPS Swasthya. The health insurance component is offered as a group policy, with the PFRDA as the master policyholder.

Subscribers can take coverage for themselves or extend it to up to two adults and two dependent children. The entry age for the insurance is 18 to 70 years, while renewal is permitted up to and including 85 years.

The policy is a super top-up, which means the insurer starts paying only after the specified deductible is met. The deductible varies with the sum insured: ₹10,000 for a ₹1 lakh sum insured, ₹50,000 for a ₹5 lakh sum insured, ₹1 lakh for a ₹10 lakh sum insured, and ₹3 lakh for a ₹30 lakh sum insured.

Premiums are divided into three age cohorts: 18-40 years, 41-60 years and 61-70 years.

For instance, a ₹30 lakh sum insured with a ₹3 lakh deductible costs ₹1,732 for those aged 18-40 years, ₹2,523 for those aged 41-60 years and ₹4,953 for those aged 61-70 years, according to PFRDA data. Currently, Aditya Birla Health Insurance offers it through the Axis Pension Fund.

“Premiums are 30-40% cheaper than competing plans available in the market,” said PFRDA chairperson S. Ramann.

However, a direct comparison with retail super top-up policies is difficult because a similar combination of sum insured and deductible is not readily available in the market. Some products offer a closer comparison.

At ICICI Lombard, a ₹25 lakh sum insured with a ₹3 lakh deductible costs ₹5,125 for a 40-year-old, ₹13,377 for a 60-year-old and ₹24,398 for a 70-year-old.